Offshore Wind Farm Developers Seek Better Contract Terms

Electrification — the switch from fossil fuels to clean electricity as the power source for building systems — just got short-circuited in New York.

The developers behind a planned offshore wind farm south of Long Island known as Empire Wind 2 have canceled a contract with the state, in what may be a bid to win more favorable terms, Crain's reports. British Petroleum and its project partner Equinor, based in Norway, issued a press release on Wednesday saying they were scrapping a 2022 agreement to sell power to the New York State Energy Research and Development Authority (NYSERDA).

If the project is abandoned, it will be a major setback for New York co-op and condo boards planning to switch to building systems powered by clean electricity as a means of complying with Local Law 97, which sets caps for building carbon emissions and fines building owners who fail to meet those caps. The law went into effect on Monday, Jan. 1.

Rather than plannng to abandon the project, the developers appear to be positioning themselves for more favorable terms from NYSERDA. The cancellation of the contract “provides the opportunity to reset and develop a stronger and more robust project going forward,” says Molly Morris, president of Equinor Renewables Americas.

The termination pressures Gov. Kathy Hochul’s administration as it proceeds with a rebidding process for offshore wind contracts in New York. NYSERDA announced the new process in November after the Public Service Commission rejected petitions from four companies to pay them at least $12 billion more to generate wind power in the state.

The developers cited rising costs due to inflation, soaring interest rates and supply chain challenges. In response, the Hochul administration reopened the bidding process for existing contracts with an accelerated timeline. Bids for the new contracts are due Jan. 25. Winners are expected to be announced by the end of February — a pace that indicates the state’s urgency to ensure New York’s offshore wind projects advance.

Empire Wind 2, proposed for a swath of 80,000 acres of open ocean, promises to generate enough energy to power one million New York homes and move the needle on New York’s climate target of generating 70% of its electricity from renewable sources by 2030.

The arrangement the companies ripped up on Wednesday had agreed to sell energy credits at a price of $107.50 a megawatt hour. They now say they will need to get $177.84 per megawatt hour to make the project economically feasible.

Stay tuned. The last chapter of this saga has yet to be written.